Bad and good news for FQHCs in the latest Republican tax bill

The Senate passed their version of the Republican tax bill early Friday morning, setting the stage for a conference committee with the House to reconcile their previously passed bill this week. A tax “reform” bill only comes along about once in a generation, making this important. We don’t post partisan political material here, so I’m not talking about the politics of the Republicans finally notching a significant legislative win; rather, we’re looking at the bill’s impact on the real world of FQHCs and Medicaid.

The Senate version of the bill repeals the individual mandate to buy health insurance. Most press analyses over the weekend indicate that the House will likely go along. As reported by Washington Post, this turns Obamacare Marketplaces from mandatory to voluntary:

The Congressional Budget Office, the official nonpartisan estimator, has predicted that this change would cause health insurance premiums to rise by about 10 percent a year and prompt 4 million people to drop insurance by 2019 and 13 million to drop it by 2027.

There are plenty of other estimates of what repealing the mandate will do, but over time it will almost certainly destabilize the Exchanges/Marketplaces and individual insurance landscape. The impact on FQHCs is likely to both bad and good (maybe that’s true of most complex legislation, which are usually drafted by “K Street lobbyists”).

First, the bad news: One impact of Obamacare has been a dramatic increase in the number people enrolled in Medicaid, because of the expansion of Medicaid eligibility in most states, as well as HRSA funding for an army of FQHC-employed “navigators” to enroll patients in Medicaid. FQCHs were originally intended to serve uninsured and underinsured people, not Medicaid enrollees. Still, most FQHCs have become the de facto Medicaid providers in their service areas, since many FQHC service areas have few primary care and specialty care providers and fewer still that will accept new Medicaid patients. Keep in mind that Medicaid is insurance, not health care; like all health insurance, it is only as good as the patient’s ability to find a provider who accepts Medicaid.

Without going to mind-numbing detail, Medicaid is essentially a joint federal/state-funded, fee-for-service program that reimburses providers for service encounters. As more Americans with Medicaid seek care from FQHCs, the FQHCs are faced with same dilemma confronting all providers—Medicaid payments may not and often do not fully cover the cost of providing certain encounters. Like all businesses and nonprofits, FQHCs have to “make money” to keep the lights on. FQHCs have several advantages over other nonprofit and for-profit providers, including enhanced Medicaid (and Medicare) reimbursements.

Still, an FQHC has to run a tight ship not to go into a Medicaid reimbursement death spiral. The more Medicaid patients an FQHC has, the larger this challenge becomes, and the tax bill will likely result in FQHC’s getting a flood of new Medicaid patients, as well as uninsured patients bailing from Marketplace plans, when the mandate ends. FQHCs are “providers of last resort” and in theory can’t refuse care, regardless of a patient’s lack of insurance or ability to pay. All FQHCs have sliding fee scales for this purpose, but, once again, they have to be well-managed to cover the cost of sliding fee scale-payers, including no-payers.

Now for the good news: In addition to reimbursements from Medicaid and other third-payers, FQHCs also receive annual Section 330 grants. As we’ve written about before, Section 330 grants account for about 18% of FQHC revenue and Section 330 grants don’t depend on the number of Medicaid or self-pay/no-pay patients served. This built-in cushion will help FQHC weather the consequences of the Republican tax bill.

Over time, lobbyists for the National Association of Community Health Centers (NACHC), the FQHC trade group, and their affiliated Primary Care Associations in each state, for example the California Primary Care Association (CPCA), will go to work. This will likely result in larger Section 330 grants, specialized grants to cover the impact of the tax bill, increased New Access Points (NAP) grant competitions, or a combination of all three. Although mostly forgotten in the media, FQHCs received a huge increase in funding under the 2009 Stimulus Bill and ACA (Obamacare) legislation. I don’t see any reason why this won’t repeat itself in 2018, as the impact of the tax bill on insurance, health care access, and FQHCs becomes clear.

Some version of Obamacare is likely here to stay and FQHCs will be the primary mechanism for providing care to Medicaid and uninsured people for the foreseeable future.

In other healthcare news, CVS (the drug store) plans to buy Aetna (the insurance company). This is a seemingly unusual pairing, and at first glance I don’t know what to make of it, save to think that we’re seeing unusual times and strange alliances in the healthcare industry.

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